Partnership Results in Natural Store Brands on Walmart.com

Redmond, WA—Natural products retailer VitaminLife, with a 4,000-ft2 store and an online business based here, is now selling products—including brands traditionally only sold by natural products retailers—through Walmart.com. This appears to be the first supplements retailer to have made such a partnership with Walmart. While this news may be disconcerting to some independent retailers, just how such eCommerce marketplaces are intersecting with the natural products industry is complicated.

In 2009, Walmart made news when it expanded its online retail operation with Walmart Marketplace, a venue through which approved retailers can sell their products on Walmart.com. This distinction is key. Since Walmart is hand-picking which retailers can sell products on its site, those selected are legitimate retailers such as VitaminLife. Their Walmart “stores” are essentially extensions of their own businesses; in other words, the products are not sold by Walmart itself, though they are available though Walmart.com. Thus, retailers with contracts to sell brands to consumers and not resellers are fairly complying with their agreements.

In fact, VitaminLife is first and foremost a brick-and-mortar natural products store, says Dean South, president. Like many similar businesses, the store dedicates time, space and effort to educational programs. “Lectures and seminars is the key to long-term success [as a natural products retailer],” says South of VitaminLife, which has seven-figure sales annually.

VitaminLife began selling online in the first place because local Microsoft executives who typically visited the store wanted product shipped to their offices. Since then, VitaminLife’s online business has grown, and its reach extends far beyond its local area with one-third of shipments going to rural zip codes. “That means we’re making products available to people who didn’t have them before. That’s growing the pie,” says South.

While the emphasis of the company is on its physical location, VitaminLife’s business model is a hybrid. And recently, it branched out further into cyberspace through the Walmart Marketplace. “We view it as a tool to reaching more customers,” says South. “It’s an advertising vehicle to bringing new customers into the industry.” South points out the store only becomes a part of eMarketplaces that are reputable and treat shoppers fairly.

WholeFoods contacted several major nutrition store brands that are now sold through the VitaminLife piece of Walmart Marketplace. Two brands said that while they aren’t happy their products are available on Walmart.com, VitaminLife isn’t conducting business outside the bounds of their contracts, including pricing agreements. One brand assured WholeFoods Magazine that the discounted prices appearing on Walmart.com through VitaminLife are the same that all its customers receive. In other words, there are no cut rates.

Given these factors, some brands felt there was little to be done about the offering of their products on Walmart.com through VitaminLife, a legitimate natural retailer.

Another brand, NOW Foods, had a different take on the matter. “We were very surprised and upset to see our NOW products on Walmart.com,” stated Dan Richard, national sales manager. “NOW Foods does not want our products sold by Walmart.com because it is a mass-market Web site and contrary to our sales policy. Our web customer VitaminLife had placed all major brands on the Walmart site, including NOW’s, without our approval.”

He added that NOW Foods is working with VitaminLife to get its products removed from Walmart.com as soon as possible.

Jarrow Formulas also reported it has asked VitaminLife to remove its products from Walmart.com. Though Walmart.com isn't directly selling its brand to shoppers, Jarrow Formulas reiterated its position that it does not want its products sold by any mass retailer.

Some brands pointed out that the “invitation only” policy of Walmart.com to legitimate retailers is far better than the free-for-all at other sites. It would be easy through the Amazon.com marketplace, for instance, to sell extremely discounted products (perhaps even damaged, expired or adulterated items) anonymously under a false company name. Some unscrupulous individuals have even cloned fake products for sale through Amazon’s fulfillment center. Two natural brands told WholeFoods they have been chasing offenders through the legal system, but it has proven extremely difficult to shut down these businesses due to the lack of Internet transparency.

If Walmart.com continues to vet its partners, it could be a good opportunity for retailers who don’t have high-traffic Web sites to sell products online, one brand felt. Nonetheless, WholeFoods spoke with one independent retailer who believes selling natural brands is now on an unlevel playing field since several are currently available through a mass-market site for shoppers across the globe to purchase.

To add another layer to the complicated picture of eTailing, some businesses (like Amazon) also have their own warehouses and sell stock to consumers. And, some natural companies sell their brands direct to Amazon for sale in this way.

South believes there is some danger in this practice because it strips out the consumer education aspect out of natural products retailing. “I wonder if these manufacturers will hurt themselves in the long term,” says South. “If a person immediately goes online to get a new product, they’re not going to get the education to support the product launch. What will they do?” asks South, predicting manufacturers that favor online sales through venues like Amazon may have an especially difficult time launching more intricate formulas online that warrant customer support. Instead, shoppers would have to be pushed (through social media, let’s say) to request information from companies. “But, you need the one on one at the store level,” South states.

In addition, the extreme discounting that can occur on Amazon may devalue a brand. South says he knows of one major natural brand that pulled out of Amazon for this reason.

Published in WholeFoods Magazine, February 2014 (online 12/13/13, revised 1/7/14)